You're only thinking about your dues and not the country.
You're only thinking about your dues and not the country.
WHY SELL, SELL, AND SELL OUR SOEs? WE MUST BE WARY OF THE IMF 5 months ago
We need just three: Debt Ratios, Gross Margins and Net Margins to begin with efforts to find out why our SOE’s are not doing well and come up with problem based solutions specific to each SOE.
We need just three: Debt Ratios, Gross Margins and Net Margins to begin with efforts to find out why our SOE’s are not doing well and come up with problem based solutions specific to each SOE.
WHY SELL, SELL, AND SELL OUR SOEs? WE MUST BE WARY OF THE IMF 5 months ago
Private Sector Participation is not a TABOO! But we don't have to sell our State Owned Enterprises like the Ghana Telecom and now the Electricity Company of Ghana in order to liberalize their Operations.
We should create ... read full comment
Private Sector Participation is not a TABOO! But we don't have to sell our State Owned Enterprises like the Ghana Telecom and now the Electricity Company of Ghana in order to liberalize their Operations.
We should create the necessary conditions for the Private Sector to break new grounds and not move in to capture State Enterprises. If the government of the day can not promote the growth and profitability of State Enterprises, that is not good.
I find it very hard to wrap my mind around this! This is not the only best way LEGACY DEBT can be addressed in order to make these sectors financially sustainable. We don't necessarily have to sell these companies if we are looking at attracting the much needed investments and technical expertise to address legacy debts.
Of course, any Company can end up with negative net margin in the presence of even positive gross margins primarily due to high operating expenses, interest payments on debt, tax liabilities, depreciation and amortization, one-time or unusual expenses, inefficient operations, and suboptimal pricing strategies. These expenses, when combined, can exceed the gross profit generated from sales, resulting in a net loss.
In our case, What was the major source of financial risk on the companies Income Statements identified by the IMF in their July 2025 country report on the fourth review of Ghana's $3billion 3 year- ECF?
What is the Gross Margin, Net Margin and the Debt Ratio of our SOEs?
What was the Gross Margin, Net Margin and the Debt Ratio of Ghana Telecom which prompted its sale?
What is the Gross Margin, Net Margin and the Debt Ratio of the Electricity Company of Ghana which is prompting this recommendation by the IMF?
"WHAT CAN NOT BE DONE TO TURN THEM AROUND?"
When the PNDC embraced privatization in the 80s after illegally removing the Limann administration, suspending the constitution, dissolving parliament and placing a ban on all political party activities and running the country without an APPROVED National Development Plan/Agenda, they never published any data about The gross margins, which represents the amount of revenue retained by our SOEs after the direct costs of producing their goods and services have been subtracted, neither did they publish any data on their Profit/loss as a percentage of revenue for action plans to turn them around.
Talking about Growth and Profitability, The people that are going to buy the SOEs, how are they going to make them PROFITABLE? Why can't we implement those actions to turn them around and make them profitable? Why don't they break new grounds and have their own start ups?
DOES OUR SOEs HAVE POSITIVE GROSS MARGINS? IF NOT WHY? IF THEY HAVE, HOW DO THEY END UP WITH NEGATIVE NET MARGINS? HOW DO WE TURN THEM AROUND?
Gross margin represents the profitability of a company's core business operations, specifically the difference between total revenue and the cost of goods sold (COGS). Net margin, on the other hand, reflects the overall profitability of a company after considering all expenses, including COGS, operating expenses, interest, and taxes.
A company's gross margin provides a snapshot of its efficiency in producing goods or services. A positive gross margin indicates that a company is selling its products or services for more than the direct costs of producing them. However, a positive gross margin doesn't guarantee overall profitability. Net margin provides a more comprehensive view of a company's financial health because it accounts for all expenses.
WHY DOES OUR SOE's HAVE NEGATIVE NET MARGINS DESPITE POSITIVE GROSS MARGINS?
Several factors can lead to a negative net margin even when a company has a positive gross margin:
1. HIGH OPERATING EXPENSES: Operating expenses are the costs incurred in running a business, excluding COGS. These include:
Selling, General, and Administrative (SG&A) Expenses: These cover a wide range of costs, including SALARIES OF THE TOP ECHOLEON, salaries, marketing, rent, utilities, and administrative costs. If these expenses are too high relative to revenue, they can erode the gross profit, leading to a negative net margin WHICH LED TO THE COLLAPSE OF GHANA AIRWAYS.
Research and Development (R&D): Companies that invest heavily in R&D may have high operating expenses, especially in the technology or pharmaceutical industries.
INTEREST EXPENSE: If a company has significant debt, the interest payments on that debt can be substantial. These interest expenses are subtracted from gross profit to arrive at net income, potentially pushing the net margin into negative territory.
TAX LIABILITIES: Taxes are another expense that reduces net income. High tax rates or unexpected tax liabilities can contribute to a negative net margin.
DEPRECIATION AND AMORTIZATION: These are non-cash expenses that reflect the decline in value of assets over time. While they don't involve an immediate cash outflow, they reduce net income and can contribute to a negative net margin.
ONE-TIME OR UNUSUAL EXPENSES: Unexpected costs, such as legal settlements, asset write-downs, or restructuring charges, can significantly impact net income and lead to a negative net margin, even if the core business is profitable.
INEFFICIENT OPERATIONS: Poor cost management, including overspending on marketing, EXCESSIVE SALARIES BENEFITS OF TOP ECHOLEON, or inefficient production processes, can drive up operating expenses and negatively affect the net margin.
PRICING STRATEGIES: While a company may have a positive gross margin, if its pricing strategy is not optimized to cover all expenses, including operating costs, the net margin can be negative.
REVENUE DECLINES: A decline in revenue can lead to a negative gross profit margin when a company experiences a drop in sales.
In essence, a company can have a positive gross margin (making money on each sale) but still lose money overall (negative net margin) if its operating expenses, interest payments, taxes, or other expenses are too high to be offset by the gross profit.
PROBLEM BASED TURNAROUND STRATEGIES WITHOUT SELLING THE SOE'S
Turnaround Strategies
Turning around OUR SOE's with negative net margins requires a comprehensive approach that addresses the underlying causes of the losses. Here are some potential strategies:
COST REDUCTION:
REDUCE OPERATING EXPENSES: Identify and eliminate unnecessary expenses. This might involve streamlining operations, reducing headcount, renegotiating contracts with suppliers, or improving energy efficiency.
IMPROVE EFFICIENCY: Implement process improvements to reduce waste and increase productivity. This could involve adopting new technologies, automating tasks, or optimizing supply chain management.
MANAGE INTEREST EXPENSES: Refinance high-interest debt, negotiate better terms with lenders, or reduce debt levels.
REVENUE ENHANCEMENT:
INCREASE SALES VOLUME: Implement strategies to increase sales volume, such as expanding into new markets, launching new products or services, or improving marketing and sales efforts.
IMPROVE PRICING NOT NECESSARILY INCREASING PRICES: Evaluate pricing strategies to ensure that products or services are priced competitively while still generating sufficient gross profit.
ENHANCE CUSTOMER RETENTION: Focus on improving customer satisfaction and loyalty to reduce customer churn and increase repeat business.
OPERATIONAL IMPROVEMENT:
OPTIMIZE PRODUCTION: Improve production efficiency to reduce COGS and increase gross margin.
IMPROVE SUPPLY CHAIN MANAGEMENT: Negotiate better terms with suppliers, optimize inventory management, and streamline the supply chain to reduce costs and improve efficiency.
INVEST IN TECHNOLOGY: Implement new technologies to automate tasks, improve efficiency, and reduce costs.
FINANCIAL RESTRUCTURING:
RAISE CAPITAL: Secure additional funding through debt or equity financing to improve the company's financial position.
Restructure Debt: Negotiate with lenders to restructure debt payments or obtain more favorable terms.
STRATEGIES ADJUSTMENTS:
FOCUS ON CORE COMPETENCIES: Concentrate on the company's core strengths and divest ONLY non-core assets or business units.
EXPLORE NEW MARKETS: Expand into new markets or segments to increase revenue and diversify the company's customer base.
DEVELOP NEW PRODUCTS OR SERVICES: Innovate and develop new products or services to meet changing customer needs and generate new revenue streams.
MONITOR AND CONTROL:
IMPLEMENT STRONG FINANCIAL CONTROLS: Establish robust financial controls to monitor expenses, track performance, and identify areas for improvement.
REGULAR PERFORMANCE REVIEWS: Conduct regular performance reviews to assess progress, identify challenges, and make necessary adjustments to the turnaround plan.
You're only thinking about your dues and not the country.
We need just three: Debt Ratios, Gross Margins and Net Margins to begin with efforts to find out why our SOE’s are not doing well and come up with problem based solutions specific to each SOE.
Private Sector Participation is not a TABOO! But we don't have to sell our State Owned Enterprises like the Ghana Telecom and now the Electricity Company of Ghana in order to liberalize their Operations.
We should create ...
read full comment